Auction for Ladera Ranch: A foreclosure bidding war with a twist

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What really happens at foreclosure auctions? I’ve posted an latimes.com video and a photo gallery that take you inside the foreclosure auction staged last week by DoveBid and Catalist Homes at the Fairplex in Pomona.

We focused on the bidding for the Orange County house at left: 3 Magnolia Drive in Ladera Ranch, probably the nicest house of the 75 homes that went up for auction. Four bedrooms, 3 bathrooms, it sold for $1.2 million in 2005, but in this market was put up for auction with a scheduled opening bid of just $429,000. Because the opening bid was so low, there was a spirited bidding war for the home.

I’d like to think the video is worth watching for the surprise ending -- which itself is an education in how foreclosure auctions work. Those of you who can’t wait can click below and I’ll explain what happened.

Here’s what happened: The winning bid for this home came in at $705,000. Remember, the bidder agrees to pay an additional 5% premium to the auction companies. So the total bid was $740,000 -- a 38% discount from the peak sales price of $1.2 million. However, the bank or lender that owns the home reserves the right to reject the high bid as too low, and that is what happened here.

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Don Kelsen, L.A. Times